Tamil Nadu to absorb Rs 32,000 cr of power utility's debt

Chennai: After about 10 months of dillydallying, Tamil Nadu has in-principle agreed to join the Ujwal Discom Assurance Yojana (Uday) to bring Tamil Nadu Generation and Distribution Company (Tangedco) out of a financial mess, caused mostly due to high debt. The state government has offered to take over Rs 32,660 crore out of Tangedco's total debt of Rs 81,782 crore under the Uday scheme, said a highly placed source.

The breakthrough came about during a meeting of Union power minister Piyush Goyal and state power minister P Thangamani in New Delhi on Friday. TOI, in its September 9 edition, had said that Tangedco was all set to join Uday after a meeting of the power ministers. The Centre has agreed not to insist on revising power tariff each quarter as prescribed in the scheme.

"Tangedco will also issue bonds for Rs 10,000 crore. The state government wanted the Centre to waive conditions under the Fiscal Responsibility Budget Management Act (FRBM) to keep the state's fiscal deficit above 3% of the GSDP," said a senior official privy to the developments.

A formal announcement about Tangedco joining the discom reformation scheme will be done after the Tamil Nadu cabinet is briefed about the meeting deliberations. "Both the governments have narrowed down their differences on Tangedco joining the Uday scheme. The sticking point is the FRBM and the state government, through the cabinet, will have to come out with a suggestion," said the official.

"Tangedco is expected to join Uday by December so that it will get three months before the end of current financial year to float bonds for managing its share of debts," he said. Once the government agrees to take over Rs 32,660 crore debt, Tangedco will be saving Rs 3000 crore annually on interest alone. The company needs to pay only 8% to the government instead of 12% now being paid to banks.

The other demands from Tamil Nadu include 25% grant from the Centre as in the 2012 FRP programme and commercial banks should provide 50% cash loss financing for the next 5 years as some cash losses will persist during the initial years.

Meanwhile, the Centre has agreed to initiate steps to set up an inter-state green corridor. "Tamil Nadu has abundant green power in the form of wind, solar and nuclear energy. During lean season (non-summer months) this power can be sold to other states which need to fulfil their renewable power obligations, but currently shortage of transmission lines hampers power transfer from TN to other states," said the official.

The state government has also sought separate funding for distribution projects in the state to cut down aggregate technical and commercial losses (A&TC). Currently, the A&TC losses in Tamil Nadu is around 20.91% and separate funding will help improve the state distribution infrastructure.